Consensys urges SEC to 'endorse' spot Ethereum ETF safeguards

Consensys, the software company behind the MetaMask digital wallet, has called on U.S. regulators to recognize the advanced protections inherent in the design of Ethereum (ETH).

The Fort Worth, Texas-based company wrote a letter in response to the U.S. Securities and Exchange Commission’s (SEC) recent pending rule change petition on Nasdaq to allow iShares Ethereum trading Request for Public Comment. (196 words)

In the letter, Consensys explains that regulators’ concerns that Ethereum is vulnerable to fraud and manipulation are unfounded.

The company believes that several key aspects of Ethereum’s proof-of-stake (PoS) implementation make it less susceptible to tampering than the Bitcoin (BTC) proof-of-work (PoW) consensus model previously approved by the SEC.

The request, issued by the regulator on March 8, seeks feedback on various aspects of Ethereum, including its proof-of-stake consensus mechanism and the degree of concentration of control or influence by a few individuals or entities. It specifically asked whether these features raise concerns that Ethereum is vulnerable to fraud and manipulation.

One of the highlights of the Consensys comment letter is Ethereum’s faster block confirmation under PoS, which ensures that transaction finality can be confirmed in a shorter time than PoW. In addition, Ethereum’s PoS relies on a distributed and randomized verification process that prevents control by large-scale stakeholders, thereby reducing operational risks.

The blockchain technology company also highlighted Ethereum’s curtailed handling of validators that far deviate from the protocol’s rules, as well as the network’s Byzantine fault tolerance, making it significantly more expensive to attack Bitcoin on Ethereum.

Additionally, it highlighted Ethereum’s environmental benefits, stating that the network’s consensus mechanism is more environmentally friendly than Bitcoin.

In the letter, Consensys urged the SEC to approve a spot Ethereum ETF. The company highlighted its commitment to bringing the next billion users to web3 and said their comment letter is a step towards driving progress and providing relevant and useful information to the public.

The company said it is ready to engage in ongoing constructive dialogue with the SEC and its staff on this matter.

In addition to Consensys, other players in the crypto space have also expressed their opinions on the Ethereum ETF. In early March, reports emerged that Coinbase had met with the SEC to discuss Grayscale’s proposal for an ETH exchange-traded fund.

According to reports, Coinbase made a presentation to regulators and promised, if approved, to enter into a surveillance-sharing agreement with the Chicago Mercantile Exchange (CME) to check for any fraud or manipulation in the Ethereum ETF market.

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